The DeFi market is in crisis, Silvergate Capital's IPO – COIN360
August 19  |  3 min read

Field of Dreams

BeQuant Analytics, a daily cryptocurrency market analysis contributor

The market took a real beating last week, with DeFi outflows accelerating and the contango delta narrowing sharply for Bitcoin and Ethereum. The amount of ETH locked in the Maker DAO credit ecosystem has stabilized around 1.3% but the pressure on ETH was such that the so-called “bite” function on the Maker ecosystem, where users liquidate vulnerable CDPs, reached a 3-month high on Friday. However, since then the market has rallied, as short positions have gotten squeezed following the big announcement that the much-awaited platform by Bakkt was finally given the green light by regulators. The long-awaited Bitcoin futures and warehouse products for institutional clients will be launched on September 23. However, some of their largest prospective clients still don’t have permission to trade physically-delivered futures contracts.

The Decentralized Finance market may be suffering a crisis of confidence but the demand for the products is expected to grow from strength to strength. Companies like Summa and Keep (teams behind TBTC) are some of the blockchain companies exploring the use of Bitcoin on the Ethereum blockchain. As pointed out by The Defiant, it’s an attractive proposition because it would open up Bitcoin’s liquidity and track record as a store of value for Ethereum-based financial platforms. All the millions of people holding Bitcoin would be able to borrow against it and earn interest on it. Wrapped Bitcoin, or WBTC, is the closest we have to that today. The downside is that it relies on third parties to mint it, instead of allowing any Bitcoin holder to get WBTC in return, and then redeem it back for BTC. The advantage of TBTC is that anyone would be able to mint the ERC20 token with their Bitcoin, and that Bitcoin would be stored in a digital wallet controlled by the depositor and other signers. Users would be able to use the new TBTC ERC20 token on any other Ethereum platform.

In other news, Silvergate Capital Corporation, the holding company of startup-friendly Silvergate Bank, recently posted an updated S1 on August 15 in preparation for its upcoming IPO. As part of its roadmap, Silvergate is working on a credit-based product due to significant demand from its existing and prospective customers looking to borrow funds to buy digital currencies. The product is set to launch in the "latter part of 2019." According to Silvergate, the structure of the product would have the borrower "provide digital currency or U.S. dollars as collateral in an amount significantly greater than the line of credit."

Elsewhere, The Shenzhen Special Economic Zone will now support the inclusion of digital currency research, according to China's state media Xinhua. As per the announcement, the Central Committee of the Communist Party of China and the State Council will support Shenzhen to build a pilot demonstration zone for socialism with Chinese characteristics. Thereby supporting innovative applications such as digital money research and mobile payment in Shenzhen.

Thank you for reading,

The BeQuant’s Analytics team